EDMONTON — Sluggish oil prices are forcing Alberta to dip into its reserve fund and look for more in-house savings to keep its $10.5-billion deficit from sliding further into the red.
In his first-quarter fiscal update, Finance Minister Joe Ceci said the province had expected the West Texas Intermediate benchmark oil price to average out at US$55 a barrel this year.
Instead, it’s hovering below US$49 a barrel and isn’t expected to rise much in the near term.
“The forecast (at budget) in March was based on the best private sector forecasts available. The same is true of the updated forecast,” Ceci said Wednesday. ”What it speaks to is a tremendous volatility in world oil markets.”
The province had hoped to bring in $2.5 billion in oilsands royalties this year, but now expects to take in $563 million less.
Ceci said the government will use half of its $500-million contingency fund to keep this year’s deficit from growing.
It also aims to double the amount of money spent on department operations to $400 million from $200 million. The government will continue to consolidate services, streamline IT, reduce travel and maintain hiring restraints while avoiding civil service layoffs.
About $120 million has already been found, he said.
“It’s an ongoing exercise and I know my colleagues in different ministries are up for it.”
Ric McIver, the United Conservative Party finance critic, said taxpayers deserve more details on the savings.
“The minister gave himself a pat on the back for doubling the in-year savings projections, but can’t tell us where these savings are coming from, or why he’s so confident in his double projection,” said McIver.
“One could at least wonder whether the second $200 million wasn’t concocted to make today’s media conference go better for the minister.”
Ceci noted there are bright signs on the horizon. The province expects the economy to grow by 3.1 per cent in 2017, up from the March budget forecast of 2.6 per cent. Employment is also expected to rise by 1.3 per cent, higher than the 0.9 per cent forecast in the budget.
Alberta has been struggling for years with a prolonged trough in oil prices, draining billions of dollars from its bottom line and throwing thousands of people out of work.